2 weeks ago
 

TUI reduces the seasonal swing

TUI Group continues to improve its key financial and operational metrics and has returned its first-ever positive nine-month EBITA.

Its year runs from October to September and for the first nine months it has recorded an underlying EBITA of €7.3 million. In the same period last year the figure was a loss of more than €45 million.

This is a significant number in the context of the vagaries of the traditional European tour operating market, where businesses invariably operate in the red during the quieter first-half period where a lot of costs are also booked. Losses are then made up during the peak summer season.

TUI has rendered this dynamic a thing of the past. As CEO Fritz Jouseen said: “Seasonal swing has been reduced”.

Operationally, it continues to grow the proportion of online bookings, from a fairly high starting point. The Nordics region in particular has always been strong when it comes to online, and during the first nine months of the financial year 77% of the business was transacted online, up from 73% in the same period last time.

Introducing the results to analysts this morning, CEO Fritz Joussen noted that the Nordic region was seeing the benefits of the ongoing group rebrand, which was helping to “reposition” TUI in the region.

The Nordics in volume terms is relatively modest, accounting for 902,000 customers in the nine months, a drop on 15/16. Germany in comparison provided more than 3.8 million and the UK 3.4 million.

Germany has always been a blot on TUI’s online distribution landscape, but today’s results show that online in the country is growing at a significant rate, albeit from a low-base. In the first nine months of last year online accounted for 14% – this time it has jumped to 18%.

Online bookings in the UK have grown steadily over the years, and came in at 59% for the first nine month, up from 58%.

The UK is also in line to be rebranded to TUI, with the rollout planned for this autumn.

Fundamental to the rebranding project is getting all the TUI businesses to operate on a global platform and to use that global platform not only to improve efficiency and revenues but also opening up new markets.

On the call, Joussen was reluctant to go into specifics about the scale of the revenue lift expected from this global platform. His take was that the focus has been on getting the platform live across all markets and that has been achieved. Conversations are now taking place with local teams about how best to use the platform in terms of revenue generation.

He promised more details will be forthcoming later the year when he will present its strategic vision for the future and also discuss “the future of the source markets”.

The rebranding to TUI will also help it solidify the exclusive nature of much of its inventory. A focus on owned and managed hotels and cruise ships – only available through TUI – means that it has more control over pricing, promotions  and yield, without having to pay huge commission to third parties.

TUI is also quite protective of its own airline capacity and is very much focused on using its fleet to fly passengers to its owned hotels and resorts, giving it total control over all elements of the package and access to upselling opportunities.

Having said that, he noted that the UK is, if anything, experiencing over-capacity generally in terms of seats. He explained that TUI was looking at “dynamic packaging” as a way to grow the market in the UK, rather than increase the number of planes it has based in the UK. He said that dynamic packaging was a “no-risk way” to grow in a mature market.

Click here to read  the press release.

Click here to see the presentation for analysts.

Related reading from Tnooz:

TUI Group’s online business continues to mature, Germany catching up [H1s] (May17)
TUI makes investment in tech provider Peakwork (Nov17)
TUI scales its IT to drive global plans (Feb17)

 

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Martin Cowen

About the Writer :: Martin Cowen

Martin Cowen is contributing editor for Tnooz and is based in the UK. Besides reporting and editing, he also oversees our sponsored content initiative and works directly with clients to produce articles and reports.

For the past several years he has worked as a freelance writer, specialising in B2B distribution and technology.

Before freelancing, from 2000-2008, he was launch editor for e-tid.com, the first online-only B2B daily news service for the UK travel sector.

 

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